Using New HMDA Results, Fed Says the GSE Loan Limit Effect Will be Small

Mortgage & Real Estate

The Federal Reserve Thursday morning released its 2010 Home Mortgage Disclosure Act database, concluding that a drop in the maximum GSE loan limit to $625,500 (from $729,750) will have only a “small” impact on mortgage originations going forward.

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The loan limit change, which is being fought by several industry trade groups, is set for October 1.

Researchers at the Fed estimate that in 2010 just 1.3% of Fannie Mae/Freddie Mac mortgages — including both refinancings and purchase money deals – fall into the GSE ‘jumbo’ category of being between $625,500 and $729,750.  

However, an additional 2.1% of 2010 home-purchase loans and 2.4% of refis would “potentially” be affected by a decline in Federal Housing Administration loan limits

The GSE loan limit floor is $417,000 in areas where the median house price is less than 65%, while the FHA floor is $217,050.   

The Fed’s analysis of the HMDA filings shows that the number of purchase mortgage originations fell to 2.5 million units in 2010, a 8.9% decline from 2009.

Government-backed loans — FHA, Department of Veterans Affairs and Rural Housing Services loans, which Fed researchers call “nonconventional” loans — comprised 46% of purchase mortgages in 2010, compared to 48% the prior year.

“The share of nonconventional loans in the home-purchase market peaked” in April 2010, the Federal Reserve says, when FHA raised its upfront fee by 50 basis points.

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